ByGeir Moulson, Associated PressSeptember 4, 2012

Passengers wait at a terminal during a flight attendant's strike of Lufthansa airline at Frankfurt airport, Germany, Tuesday, Sept. 4, 2012. A union representing Lufthansa flight attendants escalated a bitter pay dispute on Tuesday, calling members out on strike at three German airports – including the two biggest, Frankfurt and Munich – in a showdown with an airline determined to bring down costs in the face of increasingly tough competition.

BERLIN — Lufthansa flight attendants walked off the job at three major German airports Tuesday, stranding thousands of passengers in an escalating labor battle that comes as the nation's largest airline struggles to stave off threats from budget carriers and government-owned Gulf airlines.

The walkouts at Frankfurt, Berlin and Munich airports followed the Friday launch of the flight attendant union's strike campaign, called after it declared 13-months of talks failed. Late Tuesday, the UFO union threatened a nationwide 24-hour strike starting Friday.

But the airline didn't show any signs of budging, despite already losing millions through the strike. It issued a statement criticizing UFO of waging the labor dispute "at the expense of its customers," noting the union's strategy so far of only announcing strikes a few hours ahead of time makes it impossible for people to make alternate plans.

Lufthansa is trying to implement an ambitious cost-cutting program amid tough competition from European budget carriers and from aggressively expanding government-owned Gulf airlines. Their rise has hurt traditional big airlines such as Lufthansa, Air France and British Airways.

UFO is seeking a 5 percent pay raise for the airline's more than 18,000 cabin crew workers after they did without increases in recent years. Lufthansa has said it is offering a 3.5 percent raise, and is calling for a slight increase in working hours.

The union objects to what it says would be only gradual increases and lower wages for new employees.

The airline and the union also have been at odds over issues such as the possibility of Lufthansa transferring flight attendants to its partner budget airlines with cheaper contracts as part of a cost-saving program, though the walkouts are focused squarely on the pay issue.

"I have the impression both parties want to take it out on the back of the passengers to show their power, and it's a shame, because it is not our fault if employer and employees cannot agree," Olaf Terbeznik, a 38-year-old IT project manager from Berlin, said amid the strike at the capital's Tegel airport.

Lufthansa scrapped around 350 flights Tuesday because of the eight-hour strikes at Tegel and Frankfurt Airports, and an 11-hour strike in Munich.

Most of the cancelled services were on short- and medium-haul routes but about a third of intercontinental flights — including services to and from Los Angeles, Houston, Chicago, Beijing and Mexico City — were also axed.

Juergen Pieper, an analyst with Bankhaus Metzler, estimated the airline is losing around €3 million to €5 million ($3.77 million to $6.29 million) per day on the strike.

"It is not yet a big deal, but it would be a different matter if it went on for days with the entire business shut down," Pieper said, estimating a complete grounding would cost Lufthansa €10 million per day. "Then there would certainly be an effect on quarterly earnings."

The airline blamed high fuel costs and new taxes on air travel in Germany and Austria for a 24 percent decline in second-quarter earnings compared with a year earlier to €229 million ($288 million). Lufthansa announced in May that it will shed 3,500 office jobs over the coming years to cut costs and boost lagging profits.

The cuts are part of a cost-reduction program that started at the beginning of the year and aims to improve the company's operating profit by €1.5 billion compared to 2011 by the end of 2014.

"They have strong finances and a good brand, but the current management is ambitious to achieve more favorable costs and become more profitable," Pieper said. "If they want to be profitable, they have to lower costs."

Both UFO, one of several single-profession unions in Germany that tend to be more militant than the country's traditional large umbrella unions and have caused disruption over recent years, and the airline appear in uncompromising mood.

The chairman of Lufthansa's board of directors, Juergen Weber, was quoted last month as telling the weekly Die Zeit: "It is better to let it come to a big bang before the company catapults itself out of competition."

Lufthansa spokesman Klaus Walther said that "it is time for basic pay to be improved, but we must also (adapt) to changed conditions."

Things have changed over the past five to 10 years, Walther told ZDF television. "The competition situation is completely different and the economic situation is completely different too."

Airlines such as Lufthansa generate a good share of their business by carrying partner airlines' passengers to onward destinations. However, three big government-owned Gulf carriers — Emirates, Qatar Airways and Etihad Airways — have all expanded aggressively, particularly in Europe, to eat in other airlines' long-haul traffic. So rather than transferring in Germany with Lufthansa, passengers from North America or Europe heading to Asia, Africa and Australia are increasingly transiting through the Gulf's gleaming airports.

The Gulf's fast-growing fleets are filled with some of the industry's newest planes, and usually boast generous in-flight meals and entertainment. Dubai-based Emirates has grown into the world's largest carrier if measured in terms of international passenger traffic. It last fiscal year pulled in $629 million in profit despite a big jump in fuel costs.

Abu Dhabi-based Etihad, which only started operations in 2003, posted its first annual profit of $14 million last year. Qatar Airways doesn't disclose its finances.

All three carriers insist they operate on purely commercial terms and do not receive perks such as discounted jet fuel. None of them has a unionized work force, however, so they do not have to contend with strikes.

Etihad late last year when it bought nearly 30 percent of Germany's second-biggest carrier, Air Berlin PLC. It has since amassed stakes in three additional carriers and partnered with others elsewhere.